26# Inside Bar and Stochastic Forex Trading System

Submit by Janus Trader

I said before anytime frame any pair I use 15 min candle chart the higher the time frame the less the noise 30 min 1 hour are also good

The Indicator you need is Slow Stochastic setting 8.3.3 some platforms will only allow 8.3 that’s ok.

Next the key element of the system contained in all trades.

The INSIDE BAR. Is simply when the current bar is less than or equal to the bar to the left of it. The inside bar can also be the same size as the previous bar.

NOTE: The Inside Bar is sometimes also referred to as the “Inside Day” and it is a standard technical analysis pattern, however most people over look it and underestimate it. Also you can use an outside bar which is the opposite,
First candle is fully engulfed by the 2nd candle

Why the INSIDE BAR Is a very Powerful Setup!

Whenever you have an IB, the market is consolidating into a tight range of low volatility. A market will always explode out of a tight range.

How to trade

when stochastic are below or around or abit above the 20 and oversold and hooking round look for an IB, When stochastic are 80 and above or alittle below and hooked round in overbought look for an IB you will find them the best in trending markets and range bound markets but if the price action is choppy stay out

To enter a trade wait for the next bar after the IB to go up 1-2 pips higher than the IB for a buy signal or 1-2 pips lower for a sell signal. Use stochastic as a set up of when to trade the IB, also the shadow of the IB counts as the bar as well in the overall size.

If after your IB you get another bar the same size as the IB and it doesn’t go 1-2 pips either way then you may look at up to 3 more bars after the IB bar to confirm a signal. If you don’t get one stand a side and wait for a new IB to form.

For stops and exits trail a stop at the bottom of the prior bar to the IB by 1/2 pips if your more Aggressive 2 bars prior to the IB, also if you are more aggressive when stocastic’s goes in the oppersite direction but becarefull on going long as when stocastic hits 80 it can hang around a while up there first before carring on and price is still going up so wait for a hook down and going under the 80 mark.Also to exit look for the big numbers if you were trading GBP/USD look for the market to turn around at 1,9000/ 1,9025 / 1,9050 / 1,9075 / 1,7000.

I trade around 6.00am GMT until 4.00pm I look at my chart on 1 hour and see the trend for the day is it going to be up down sideways

Next is the scanner for older traders the scanner can be used to find the IB more easy once you see an IB on say GBP/USD go to your chart and see if it match’s the set up this way you can look for trades on up to 9 pairs so you should be in trades all day. The 5 period moving ave on the scanner is just to give an idea of the direction on the price. More about the scanner below.

Must stress again new people should not use scanner stick with one pair only

This System also get’s you into trades Before Everyone else most of the time.

To see a IB go to this Friday 30th 2007 just gone GBP/USD 5 min chart @ don’t know if the time is right I think its 3.15 pm Gmt London time the 100 pip move this is an inside bar set up the two candles @3.10 and the IB @3.15 this was a perfect set up.

THIS IS TO USE WITH THE SYSTEM

To all the The new guys please don’t use this scanner you should only work with one pair until you have traded successfully for at least 6-12 months with a real account and you no how to trade all the currency pairs.